Jack Ma’s Yunfeng Capital leads $315 million funding round for industrial e-commerce firm ZKH

30-Oct-2020 Intellasia | South China Morning Post | 6:02 AM Print This Post

ZKH Industrial Supply (Shanghai) Co, operator of an e-commerce platform for industrial products, has raised $315 million from its Series E funding, which the company describes as the largest single round of financing in China’s industrial supplies sector.

The round was led by Yunfeng Capital, a Shanghai-based private equity firm co-founded by Alibaba Group Holding founder Jack Ma in 2010, according to a statement from ZKH posted on its official WeChat account on Wednesday. Alibaba is the parent company of the South China Morning Post.

Other investors include state-owned China Structural Reform Fund Co, Eastern Bell Capital, Tencent Investment, Tiger Management Corp, Matrix Partners China and Legend Capital.

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“ZKH is committed to becoming a platform-based eco-enterprise,” said company chief executive Chen Long in the statement. “We will continue to work to enhance digital and supply chain capabilities, becoming the ‘infrastructure’ for the industrial supplies industry.”

ZKH said the funds raised will be mainly used for expanding its market, including the categories and services that it covers, as well as on technology research and team building. It also plans to combine “self-operated products and third-party suppliers” on its platform.

The company’s last funding round was completed in June last year, when it raised $160 million from a group of investors led by Tencent Investment, which is a unit of internet giant Tencent Holdings. It has now raised more than $670 million since its first funding round in 2016.

Founded in Shanghai in 1998, ZKH initially operated as a sales agent for companies that made adhesives, lubricants and other chemical products. In 2014, it transitioned to an e-commerce platform for industrial maintenance, repair and operations supplies. Its goal is to create an online industrial products marketplace with transparent pricing for various industries, including car manufacturing, mining and metallurgical industries.

The stakes are rising for ZKH, as China’s online business-to-business (B2B) transactions are likely to get a boost from increased digitalisation over the next five years amid manufacturers’ efforts to enhance efficiency and save costs. China accounted for 28 per cent of global manufacturing output in 2018, according to data from the United Nations.

The value of B2B deals in China could more than triple to 2.4 trillion yuan by 2024 from 700 billion yuan last year, according to a recent study from Bain & Co and Alibaba.

China’s leadership is facing an uphill task of sustaining its explosive economic growth in the past decade amid rising trade tensions. It has been encouraging manufacturers and service providers to infuse more technologies in their operations. E-commerce is expected to help businesses slash marketing and human-resource costs, while breaking down trade borders and widening access to customers around the globe.

Besides its industrial supplies platform, ZKH has also developed its own smart warehouse to serve more than 15,000 manufacturing enterprises, according to the company’s website. Its logistics operation uses artificial intelligence and an Internet of Things network to manage and process more than 28 product lines, which comprise about four million industrial items.

“Industrial supplies is a trillion-scale industry, and there is huge room for efficiency growth,” said Li Na, a partner at Yunfeng Capital, in the statement. “We believe that the company will contribute to the industrial upgrading of China’s manufacturing industry through its one-stop service platform and digital empowerment.”



Category: China

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